LONDON, United Kingdom — Nineteen months ago at the time of its launch, The Outnet was better known as Net-a-Porter's cheap and cheerful younger sister. Now, it seems, the discount fashion retailer is all grown up, and getting an extreme makeover.
Each month, The Outnet receives over one million unique visitors, less than ten percent of which overlap with the existing Net-a-Porter customer base. The United States, where The Outnet has experienced year on year growth of over 90 percent, now constitutes its biggest market. And, 70 percent of the product on The Outnet does not come from Net-a-Porter, so The Outnet has its own buying teams and relationships with brand partners. All of this seems to be working wonders, leading to an estimated annual turnover of more than $50 million, something that took more than 5 years for Net-a-Porter to achieve.
But like a teenager coming-of-age (nineteen months is a long time in the digital world), the Outnet is carving a new path to move out of its big sister's shadow. On Thursday, the company will unveil a new brand identity and website design which, according to the Outnet, gives "a wink to French Vogue." Gone is the ubiquitous pink circle and in is a new minimalist, streamlined look that has a much more upscale feel. It seems that The Outnet wants to show that just because you shop at a discount doesn't mean you can't look and feel like a million bucks.
BoF got the exclusive interview with Stephanie Phair, Director of TheOutnet.com, to learn more about the website's new branding strategy, its plans for mobile commerce and the state of online discount fashion retailing in general.
BoF: It’s only been 19 months since The Outnet first launched and you have had tremendous success in that short space of time. What have been your most important learnings in that first year? What’s the secret to your success?
Stephanie Phair: To scale the business this quickly it really helped to be a part of Net-a-Porter. We were able to leverage their existing infrastructure and learnings. Because brands have confidence in Net-a-Porter, that inspired confidence in The Outnet from the start.
We also launched at time when there is a greater acceptance of online shopping. During the economic downturn, the concept of discount shopping was front and centre. From a customer standpoint, there was a search for value and from a brand side, a necessity to clear stock that made The Outnet a very appealing solution. It is important to note that The Outnet was not launched in response to the recession but rather the idea was conceived well before and we’ve built it as a sustainable, long-term business.
Up until recently, discount luxury fashion was hidden away in out-of-town outlets, but the Internet changed all that. It’s now visible and is becoming an accepted form of retail with its own audience and expectations. I think part of our success to date is that we never underestimated that. From day one we wanted to turn discount on its head and offer a luxury experience just like the full price world. We achieve this through our brands, our edit, our merchandising, our editorial and our customer service – all things that were once neglected by virtue of getting a discount. We treat discount product exactly the same way as full price merchandise when it comes to the customer experience. Like any other retailer we continue to invest in the things that really matter to our customer. For example, we always knew that as part of Net-a-Porter we would have an editorial approach, but we’ve really ramped it up over the last 6 months.
BoF: If you could do one thing differently from the first 19 months, what would that be?
SP: I think we underestimated how vocal our customer is in the social space. For example, The Outnet’s first birthday yielded fantastic results for us as a business, however we underestimated the reams of comments we would receive – both positive from someone securing an item for the giveaway price of £1 or negative due to an inability to access our website. We were literally glued to our Facebook page talking live to customers who were frustrated about not getting into the site and snapping up something for £1 – and being delighted for those that did. It was great because we know our customer is engaged, but it definitely caught us by surprise and we now have a robust social media strategy in place for large scale events.
BoF: Tell us about your new look, and why you decided to refresh the branding and aesthetic of The Outnet now.
SP: First of all, one of the benefits of being an online retailer is that you can adapt and change your look. In a way, The Outnet was built from the viewpoint of a full priced business [Net-a-Porter] looking at a discount business and establishing who that customer might be. We’ve since learnt a lot about our customer. For example, before launch we envisioned that she would be young, aspirational and trend-driven – and she is certainly a part of our customer base. But for the larger part, she is an older, affluent professional with the means to indulge in luxury fashion, but who limits her expenditure (on fashion). At launch we emphasised the cheap and cheerful aspect of discount shopping when in fact we are about the fashion offering and our customers are turning to us for great fashion. In a crowded market, we notice that being a fashionable outlet – one with the best brands and a unique editorial approach - is what sets us apart and this is what we are emphasising in our new look.
BoF: There has been much discussion about the broken fashion cycle. Tell us about your strategy for combating this.
SP: The broken fashion cycle is a conversation that is going on in the full price retail world but it has actually benefited us because we capture a customer that is not an “early adopter” – in other words, she is happy to buy full price but doesn’t plan her season ahead. By the time she is ready to buy bathing suits/coats, they are no longer available. We capture her on The Outnet by having a 'buy now, wear now' approach. We’ve also made a conscious decision not to name-check seasons. For us, it’s about emphasising how great and relevant the product is irrespective of when it walked the runway. This approach gives us so much more freedom - we’re able to mix and match and focus on making season-appropriate, on-trend product available for our customers around the world. On our site there is always something for everyone because we are a global business servicing all corners of the world from Australian and South American customers to those based in mainland Europe or the Far East. But, our merchandised approach means our product offer is always relevant to the customer.
BoF: You are about to pursue a new mobile strategy. What does it take to be successful in mobile fashion commerce these days? What are the core planks of your strategy and what can we expect to see?
SP: Mobile commerce lends itself particularly well to the discount world because there is an element of scarcity and items sell out fast. Customers want to see products when they want and not just when they’re at their computer - otherwise they might miss out. With this in mind, we’ve decided to launch a mobile-enabled website and an app for the iPhone which will be available next year. Both complement one another nicely but we’ve made the decision to optimise our website for mobile first because we’re a growth business and it has a broader reach and covers more bases which for a young business is key. The most successful apps usually offer something unique in addition to an e-commerce offering and are, generally speaking, downloaded first by your most-engaged customer. However, you don’t really have control when it comes to distribution and you have to rely on rankings. With a mobile-enabled website, you can piggyback off your marketing activity for the website, whereas an app does require its own marketing – we felt we could do a better job given more time and resources.
Our app is still in development so we can’t give too much away but it takes one of the most popular features on our website - the outfits on “Dress Me” - and combines it with community.
BoF: What are your thoughts on the rise of a new kind of discount retailing, pre-sale trunk shows? Any plans for trying out pre-sale at The Outnet in the same way you have experimented with flash sales?
SP: We’ve seen it happen before with the shows – the idea of taking something that was traditionally for a chosen few and making it more widely available via the Internet. I think it’s an interesting move post-recession because it means brands can gauge the level of interest in their products and adjust inventory accordingly. For brands it can seem attractive as it cuts out the middleman.
I think brands need to be cautious though. There is a danger when relying on the “wisdom of the crowds” and delivering only what your customer wants. The job of a designer is to pave the way creatively and to push boundaries and convince us to try something new that defines trends. There could be a risk of making fashion bland. I’m not discounting the use of pre-selling for us - particularly when we create our own capsule collections with designers. There are definite benefits like crowd-sourcing and getting the customer’s point of view but it’s not something we’re thinking about right now.
BoF: Looking ahead, what do you think will be the long-term impact of flash sales and deep discounting on the consumer’s willingness to spend at full price? Is there a danger that widespread discounting will alter the consumer’s perception of luxury fashion brands like those sold on The Outnet?
SP: Discount is an integral part of retail but very few brands actually acknowledge it. This is slowly changing. The secondary market, whether its discount or pre-owned, is very important for brands to support in order to enhance their full price business and enhance the value of their brand in their customer’s mind. The solution is to start engaging with that new audience. If a brand’s approach is simply about liquidation then this is a risky move in the day of the Internet. They need to consider the discount market because the Internet is making everything so much more transparent. The discount world can support the full price model by educating the customer about what a great brand they are buying. The danger lies when brands think discount can just exist in a quiet corner of the Internet – away from prying eyes. Everything online is visible – so it is better to have control over your image and put the product into the right context.
CEO Talk is BoF’s forum for in-depth discussions with the fashion industry’s global decision makers, conducted by founder and editor-in-chief Imran Amed.
This interview has been edited and condensed.